08/07/2011 13:01
According to the Central Bank directive published in the Gazette today, the two big banks must have increased capital after 2014.
The amendment of the directive for the capital requirements and the big finance exposures aims to boost further the banks’ equity and especially their quality.
According to the Central Bank, the amendment follows the deliberations carried out in the past few months between the Central Bank of Cyprus and the big Cypriot banks as a result of which the banks have already proceeded with a capital increase.
The amendment takes into account the size and the systemic importance of the banking system of Cyprus as well as the prevailing financial conditions, promoting a more resistant banking system.
With the publication of the amendment in the Gazette, on July 8, a new index is launched, which refers to the Core Tier 1 Capital.
The Core Tier 1 Capital consists of the share capital and the reserves of the bank profits. This index is used for the first time this year for the EU wide stress tests.
The minimum of the new index has been set at 8% and is with immediate effect.
The index will increase on the basis of the percentage of the assets of each bank against the GDP of the Republic.
The capital requirements introduced have to do with the size of the banks’ activities so that the capital coverage of the risks of each one of them reflects its systemic importance for the economy as a whole.
The introduction of the new index and the sense of proportionality of the capital adequacy of each bank on the basis of its size reflect the European developments, the characteristics of the EU stress tests of 2011 and most of all the new Basel III rules, which will be the basis for the amendment of the European Directive for the capital requirements.
The aim is to secure the coverage of the banks’ risks with equity of excellent quality.
It is noted that the new requirements of Basel III will be effective from January 1, 2013 and will be implemented fully in 2019.
Cyprus is one of the first euro area countries to introduce the new index, which includes a specific reference to minimum requirements in relation to core tier 1.
In order to have enough time to adjust, the banks have been granted a period of transition until 2014.
As a result, from 2014 onwards the two biggest banks in Cyprus must have a core tier 1 capital index exceeding 10% against 8% that it is today.
The amendment of the directive for the capital requirements and the big finance exposures aims to boost further the banks’ equity and especially their quality.
According to the Central Bank, the amendment follows the deliberations carried out in the past few months between the Central Bank of Cyprus and the big Cypriot banks as a result of which the banks have already proceeded with a capital increase.
The amendment takes into account the size and the systemic importance of the banking system of Cyprus as well as the prevailing financial conditions, promoting a more resistant banking system.
With the publication of the amendment in the Gazette, on July 8, a new index is launched, which refers to the Core Tier 1 Capital.
The Core Tier 1 Capital consists of the share capital and the reserves of the bank profits. This index is used for the first time this year for the EU wide stress tests.
The minimum of the new index has been set at 8% and is with immediate effect.
The index will increase on the basis of the percentage of the assets of each bank against the GDP of the Republic.
The capital requirements introduced have to do with the size of the banks’ activities so that the capital coverage of the risks of each one of them reflects its systemic importance for the economy as a whole.
The introduction of the new index and the sense of proportionality of the capital adequacy of each bank on the basis of its size reflect the European developments, the characteristics of the EU stress tests of 2011 and most of all the new Basel III rules, which will be the basis for the amendment of the European Directive for the capital requirements.
The aim is to secure the coverage of the banks’ risks with equity of excellent quality.
It is noted that the new requirements of Basel III will be effective from January 1, 2013 and will be implemented fully in 2019.
Cyprus is one of the first euro area countries to introduce the new index, which includes a specific reference to minimum requirements in relation to core tier 1.
In order to have enough time to adjust, the banks have been granted a period of transition until 2014.
As a result, from 2014 onwards the two biggest banks in Cyprus must have a core tier 1 capital index exceeding 10% against 8% that it is today.